Corruption Laundering: The Art Of Manipulating Regulations To Block Innovation

from the plausible-deniability dept

A bunch of folks, including James Allworth himself, sent over James Allworth's excellent post at HBR entitled How Corruption Is Strangling U.S. Innovation. If you're a frequent Techdirt reader, there is little new here, though much you'll likely agree with. It details how many legacy companies use questionable regulations to hinder disruptive upstarts who are challenging their businesses via unique and innovative means. It covers a bunch of different fields or situations where this is seen: autodealers going after Tesla for daring to sell cars direct, perpetual copyright term extension that appears to be much more a function of the age of Mickey Mouse than promoting the progress, how companies like Uber and Airbnb have had to deal with a bundle of local regulations on taxis and hotels, and how Comcast doesn't count its own video content towards your download cap, but Netflix's traffic does count.

It's a great article, but the thing that struck me about it is how it would be possible for people to explain away the corruption in each case as having a legitimate basis. That's what's really pernicious here. Allworth calls out Larry Lessig's book, Republic, Lost which often tries to drive this point home by calling it "soft corruption." That is, we're generally not talking about overt corruption, the kind where someone is handing briefcases full of cash over to politicians. It's much more subtle. What you get are legacy companies who fear disruption -- and they are able to make the case that the "disruption" should be illegal because it's scary to the incumbent. That is, "we must shut down this new innovation x, because it will destroy industry y, and industry y is important to America because of all the jobs it creates!" Or, it's "we need to carefully regulate industry z, because if we don't they'll take advantage of customers!"

And, thus, there are legitimate-sounding reasons for these kinds of regulations, and supporters of them always hit back on the corruption charges, claiming that "of course, it's not corruption -- politicians are just protecting jobs / children / etc."

There's a myth out there that businesses hate regulations. That's only partially true, and it's only true in limited cases. In many industries -- especially highly regulated ones -- the incumbents often love regulations because (a) they have enough power to control the regulations, (b) they know their way around those regulations better than anyone else, (c) those regulations quite frequently limit competition and (d) those regulations quite frequently effectively block out any form of disruptive innovation by stopping it entirely.

Perhaps what this is all about isn't properly conveyed by just calling it "corruption," or even "soft corruption." I think it's better described as corruption laundering. It is corruption, but it's done through this regulatory framework to make it look, sound and (in some cases) feel perfectly legit to many people, making it much easier to keep those regulations in place. The corruption is "cleaned" of its dirty connotations because it can be wrapped in a cloth (though bogus) of "protecting jobs" or "protecting your safety." It is corruption, but the truly nefarious part is that the corruption is done in such a way that there is plausible deniability over whether or not it is truly corrupt. And that's what makes it so difficult to root out this form of corruption. It's all been white-washed in a way to have a plausible explanation, even as the pace of important innovation suffers drastically.

*Gasp*

In many industries -- especially highly regulated ones -- the incumbents often love regulations because (a) they have enough power to control the regulations, (b) they know their way around those regulations better than anyone else, (c) those regulations quite frequently limit competition and (d) those regulations quite frequently effectively block out any form of disruptive innovation by stopping it entirely.

This. A thousand times this.

Regulations are not written for our benefit. Just follow the money trail (or the revolving door between government and the "regulated" industry in question). Every time someone says "We obviously need more regulation!" I hear "Please, bend me over that table one more time!"

Corruption Laundering Chart

I'm not skilled enough to make this, but I'd love to see a chart which graphs the top 100 or so corporations based on their level of Corruption Laundering.

The rankings could be by the estimated amount of damage done to the economy, or the level of lies, obfuscation or misdirection engaged in. Or perhaps by the size of donations to government officials overseeing relevant regulatory bodies.

This would be a great thing to be able to point people to when they were considering a purchase.

I could see it as a counterpoint to the USTR's bogus 301 report and perhaps, if it got enough notice, corporations would start trying to stay low in the rankings or off the damn thing altogether.

(A quick Google search for "corporate corruption index" shows up some rankings for countries, but there doesn't seem to be anything for corporations yet.)

Oh, but I bet you'll defend Wall Street banks, Mike!

I've no doubt that you see the stock and mercantile "markets" as "organic", when actually those are a LARGE part of "what's really pernicious" in the former USA.

All a matter of chance: you were privileged to grow up with stocks and bonds, so you think the system of effectively feudal entitlements is just and fair. But if you had to actually compete for a minimum-wage job to try and work your way through college, you wouldn't be so damn keen on "capitalism", and "free markets" -- that are actually just one form of plutocracy.

Anyhoo, directly on topic: I want gov't to keep businesses and The Rich under control. Wall Street "capitalists" just damn near ruined the world in the 1920's, and they're prepared to do so again. The Rich can get money and power by wrecking the economy. They direct militaries to wreck entire coutries and steal their resources: Iraq and Afghanistan. Just look at Greece: bankers are in control, stifling the economy with "austerity" for everyone but them, stealing the wealth, leaving the people in third-world levels. BTW: I hear your born-rich pal Steve Forbes was one of the vultures moving in on that. Has he snagged an island yet?

Re: *Gasp*

Regulations are written for those with both a vested interest in their outcome AND the drive to be involved in their creation.

The public fails miserably at the 2nd part and so are very often left out of the process.

Doesn't make it right, but given the lax attention paid by most people to anything related to, well, anything that doesn't have a 'Book', 'Face', 'Desperate' or 'Housewives' in the subject it isn't exactly rocket science to see them cut out.

We have control over those in office. We need to wield it more frequently and more forcefully to get the ends we desire. SOPA/PIPA was an example.

The lack transparency and the 'corruption laundering' (love the phrase!) are merely symptoms of the lack of involvement by the US people going back decades.

And let's not forget the laundering that goes on here

This web site continues its relentless celebration of ways to keep authors, artists, musicians and film makers from enjoying the fruits of their innovation by only celebrating the so-called innovation of the file sharing crowd, the ones that continue to re-invent FTP.

Face it-- the tag of "innovation" is one that cuts both ways. You can continue to believe that the hack web sites turning a blind eye to piracy are somehow innovating, but they're not doing anything more than building a different version of FTP, a tool that's already decades old.

Now I realize that many movies, songs, and novels aren't 100% new. Artists need to remix and recreate the past. But this is much more of an innovation than the rewriting of FTP.

If you want to celebrate "innovation", you've got to be on the side of the artists and their one legal defense tool, copyright.

i would have thought that the simplest term to use in just about every case is SELFISHNESS! to me, that is used for self interest regardless of the effects had on anyone/everyone else, even though in the majority of cases, those effects are detrimental. what is unforgivable is the politicians jumping all over each other to help this action along without considering anything except who is paying the most into their personal bank account!

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Re: Re: *Gasp*

The idea that Americans have any control over the politicians that get elected is a useful fiction for those at the top.

They just need to:
(A) Get people on a team (Team Red or Team Blue). Americans love teams.
(B) Make sure the teams don't fundamentally disagree on anything substantial.
(C) Bankroll both teams' candidate.

I think our recent presidential election shows this quite nicely; Goldman Sachs won with over 98% of the vote.

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Innovation does not occur in a vaccum. It is built upon other ideas otherwise every generation would need to start with reinventing the wheel over and over again. Copyrights takes previous ideas out of the public domain. Nothing can be built on top of them.

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I did answer it.

Because copyright terms have been made longer multiple times in the last 100 years, I can't use the "I have a dream speech" to make something new yet; I am restricted or, ahem, 'hindered', in what I can do with it until it enters the public domain.

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Re: And let's not forget the laundering that goes on here

Yes. Because I want to adapt a number of newer and older Perceptional Property, but I can't - I want to take it in (to me, at least) interesting directions. I want to innovate, but I know that, as soon as I publish it, I'm at some risk, especially because I want to attach my real name to it.

Being "for the artists" doesn't mean "for the subset that I represent". If you mean that, then just say instead, "for the artists I represent." But that's never the case. When a politico says they want a law "for the children", chances are it does very little to affect that situation positively.

This is my short list of political doublespeak:

"for the artists" = "for my company's pockets, which means mine";
"Stop the terrorists" = "We want sheep, not people, so let's try and scare them!;
"for the children" = "I want my 15 seconds of fame for grandstanding and having no impact on the problem at hand."

Re: Oh, but I bet you'll defend Wall Street banks, Mike!

We don't have a free market, and we never have. What we have is exactly what people like you have always wanted: government oversight. Don't complain now about the frankenstein's monster you've created. Enjoy! You got your wish!

Re: And let's not forget the laundering that goes on here

Copyrights are not always owned by the "creators". We all know about major labels and studios, but art is another example. Many patrons use the excuse to purchase it as an investment - gambling the value will go up as the artist becomes more popular, successful, etc. If that piece sold at auction 100x's the purchasing price, who recieves the profit? It's never the original artist. Is that wrong or right? What it does do is push the original artist to continue creating more as their current works value increases. Copyrights should be contained within the framework of new works only.

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I'm not sure if copyright would have a direct influence on innovation.

However, I can see an indirect influence on innovation if copyright is used to prevent use of research studies / papers. That way, everyone is potentially starting from scratch instead of building off the works of others.

As one example, imagine trying to connect two computers today on different sides of the country if the copyright was used to prevent folks from using the TCP/IP Protocol? I suspect our lives would be very different today.

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Re: And let's not forget the laundering that goes on here

I have not seen the main writers for this site encourage piracy, but rather give example of how people can make money from the works that they create, and avoid having to find a publisher. Please not that existing copyright mainly benefits the publishers, and they are not the best at paying their creators.
There is also criticism of how copyright, and in particularly its length and excessive enforcement is damaging society. The excessive zeal with which copyright is enforced is damaging the development of new creators by trying to shut down sharing of the material that they have produces. How are new artists to develop if they cannot get their work shown and criticized. This development relied on building on other people works by various means as the technology allowed, the change the Internet made was allowing this activity to become visible to the publishers.
Further the publishers seem to be against any means of people sampling a creators work before they commit to buying it, and if successful in preventing this they will shrink their own markets. In many respects the Pirate bay is an efficient library, see this article.

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How does making copyright terms longer (not that I agree with doing such) hinder "innovation"?

Of course it is difficult to give examples of innovation that is hindered - because by definition the hindered activities haven't happened!

However I can give an example of the type of thing that is hindered. I have been involved in a research project involving text mining.

It is impossible for a small organisation to explore this technology properly because you are legally limited to works that are pre 1923 or the small number of enlightened modern authors who make their work available digitally, DRM free.

Re: And let's not forget the laundering that goes on here

This web site continues its relentless celebration of ways to keep authors, artists, musicians and film makers from enjoying the fruits of their innovation by only celebrating the so-called innovation of the file sharing crowd, the ones that continue to re-invent FTP.

Only a person who views copyright as the only solution would see it that way, bob. Plenty of celebrations of creators "enjoying the fruits of their innovation", as you say, in addition to or in leu of copyright have been explored here. You're not paying very close attention are you?

Face it-- the tag of "innovation" is one that cuts both ways. You can continue to believe that the hack web sites turning a blind eye to piracy are somehow innovating, but they're not doing anything more than building a different version of FTP, a tool that's already decades old.

The way you talk about the innovations concerning file transfers, I can almost picture you crawling down the freeway in your Model "T" Ford, since everything developed for automobiles since then isn't innovation and doesn't matter to you, right?

Now I realize that many movies, songs, and novels aren't 100% new. Artists need to remix and recreate the past. But this is much more of an innovation than the rewriting of FTP.

That is a subjective opinion and I don't agree with it. I place tons more value on the innovations of technology which have made it possible for me to voice my opinion to hundreds of other people with only negligible costs. Not to say that culture and the arts aren't important, just not as important to me.

If you want to celebrate "innovation", you've got to be on the side of the artists and their one legal defense tool, copyright.

Nope. Not me. If copyright didn't hinder innovation in other sectors, you might have a point.

Re: And let's not forget the laundering that goes on here

This web site continues its relentless celebration of ways to keep authors, artists, musicians and film makers from enjoying the fruits of their innovation

No - it is the big content companies and middlemen that do that!

I just listened today to a radio program about a 60's group called the Zombies. Despite two moderately successful albums (since recognised as classics) and a couple of singles that charted in the top five, and playing to huge concert audiences they were forced to give up because the music didn't pay well enough. The record companies and managers were stealing most of their income.

These days they could have routed around the parasites by using the net to go direct to the public. The odds are that they would not have had to split up.

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Here's what the Constitution say about intellectual property in Article I section 8:

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

Copyright and patents aren't really for the inventors and writers, they're to get what they know and create into the public domain so it can be used and expanded on by others to the benefit of the nation. That's the trade, the right to sue for a period of time in exchange for public access to the information, and since the vast majority of human innovation is derivative and comes through the study of previous works, making that information publicly available allows our technology and culture to advance much faster. The greatest lobbyist for extending copyright, Disney, made it's fortunes mostly off of retelling in a new manner, animation, such public domain fairy tales as "Beauty and the Beast", "Cinderella", and "Snow White".

Re: Re: Re: *Gasp*

You should probably read more of Mike Masnicks posts. Politicians care about money, yes and that is a problem. But they also care if they actually gets elected.

Getting disenfranchised is making you a dwerk instead of mindless and the politicians will ignore you even more than before. If you keep pushing and speaking up to the politicians, they will start to believe you and some day "Carthago delenda est" will destroy Carthago.

Only dead fish follow the flow to disenfranchisement. Learn the reasoning of your opponent, learn the system and learn how to abuse it. Just claiming that money buys the world and implying that nothing can be done is the undoing of the process and not what is controlling the process. You are just weakening democracy and strenghtening the people hijacking it, by letting there be one less person to appeal to!

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I suppose if you relegate the term "innovate" to a euphemism for "recycle", I could see your point.

Again, show me something "innovative" that didn't come from something else. Show me something that came from the ether that wasn't directly or indirectly influenced by previous ideas. Copyright maximalists like to think that everything they come up with is brand spanking new, pulled out of the ether, and wasn't influenced by other things. Those folks don't understand humans, and the fact that we all sit on the backs of giants. Everything we think up is based on something that came before. We learn by imitation. We copy what came before, and meld it into something new. MLK's "I have a dream" speech can lead to something new, and it isn't "recycled," just influential.

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Works may use ideas taken from works under copyright and works in the public domain, but this most certainly does not mean that the ideas are no longer available for use.

Ideas may not be copyrighted, so it really doesn't matter where they came from. There is no fair use for something not copyrighted, because there is no copyright to require fair use.

Of course, in the permission society copyright maximalists want, ideas would be copyrightable, along with facts, and maybe even inferences and innuendo, because "we need to think of the poor artists who cannot create unless they make $100,000 each time someone thinks of their creation." Meanwhile the only ones getting rich off the back of the artists are the parasites at MPAA/RIAA member organizations.

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But if you can't come up with something "new" without infringing upon a 40 year old speech, are you really and truly innovating?

You can be, of course. Audio collage (such as Negativland, etc.) is absolutely innovative and uses existing culture as its raw material. Even the lesser form of that, remixing, can be innovative. In both cases, the level of innovation can and often does exceed that of the original works.

Also, if your definition of innovation is "something completely new", then innovation doesn't exist and never has.

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Fair use is insufficient. To assert it you have to go to court, and many people cannot afford that regardless of how solid their legal position is.

Also, There are a lot of things that intuitively should be fair use but legally aren't. Sampling, for example.

The thing that perhaps you're missing is that the harm copyright does to innovation isn't that it prevents wholesale copying. It's that it prevents derivative works or the use of works as even a small part of a larger work that transcends the pieces used.

Re: Re: And let's not forget the laundering that goes on here

The way you talk about the innovations concerning file transfers, I can almost picture you crawling down the freeway in your Model "T" Ford, since everything developed for automobiles since then isn't innovation and doesn't matter to you, right?

Meh, the Model T was so derivative. I'm sure bob drives a Benz Patentwagen. Yeah there were only 25 made, and only a few left, but to someone like bob, only the original will do. Everything else is just a copy.

Read this

This article pulls in both what you all are saying here -- the negatives of patents and monopolies on innovation.

But also what I have been saying, which is that we are moving into a time of hypercompetition which will greatly drive down prices. Therefore I have been advocating new economic systems, primarily based on the ideas put forth in the P2P Foundation.

The robot economy and the new rentier class | FT Alphaville: "Our own personal view is that this is because we’ve now arrived at a point where technology begins to threaten return on capital, mostly by causing the sort of abundance that depresses prices to the point where many goods have no choice but to become free."

Great article. It put a lot of things in perspective for me. It's amazing how sly and under-handed these business dictators are. They could probably swim through a mud puddle and come out looking clean on the other side. It's too bad they didn't put that effort towards helping to advance humanity, instead of damaging our progression.

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No, just appease them, so that when the zombie apocalypse comes, they still have enough money to stay at home and eat pre-packaged brains, instead of having to go out and hunt it themselves, which wouldn't be good for anyone.

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Re: Re: Re: Re: *Gasp*

Americans have the illusion of choice. Politicians from both parties tow the corporate line because they know that if they take a stand against the corruption, their financial coffers will cease backing them. In essence it's a form of political blackmail.

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Re: How

well since you want a specific answer i'll try to be clear
longer copyrights means than an author no longer needs to create new content only to bask in their glory so it hinder the innovation of author that could have created 2 3 or 4 great works only creates one

also means that new authors are scared to create could i create this or it is already copyrighted for example i cant create a superHlero comic and sell it as superhiroeing(notice misspelling) because the word is trademarked by dc and marvel so we have new authors whose innovation is hindered

also the offpring of the authors can live with the work of their parents so they aren't motivated to create new content so their innovation is hindered

so i would think that when the function of copyright is being inverted they must restructure it